FINAL EXAM CHP18, 10, 19

Question 1

Marketing mix may vary according to:

Answer 1

National culture, economic development, product standards, and distribution channels

Question 2

Why do businesses use the foreign exchange market?

Answer 2

o Convert payments received for its exports, income received from foreign investments, or income received from licensing agreements with foreign firms.
o Make payment to a foreign company for its products or services in its country’s currency.
o Invest cash for short terms in foreign money markets.
o Engage in currency speculation.

Question 3

Spot exchange rates

Answer 3

Rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

Question 4

Forward exchange rates

Answer 4

A forward exchange is when two parties agree to exchange currency and execute the deal at some specific date in the future.

Question 5

Currency swaps

Answer 5

Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Question 6

The law of one price (concept & exercise)

Answer 6

In competitive markets free of transportation costs and barriers to trade (such as tariffs), identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.

Question 7

Purchasing power parity (PPP)

Answer 7

Comparison of prices of identical products determine the real or PPP exchange rate.

Question 8

Money supply and price inflation

Answer 8

o The growth rate of a country’s money supply determines its likely future inflation rate.
 Inflation is when the money supply increases faster than output increases.
o A country with a high inflation rate will see depreciation in its currency exchange rate.
o Government policy determines growth rates.

Question 9

Efficient market

Answer 9

 Efficient market is when prices reflect all available public information.
 Forward exchange rates should then be unbiased predictors of future spot rates.

Question 10

Inefficient Market

Answer 10

 Inefficient market is when prices do not reflect all available information.
 Forward exchange rates will not be the best possible predictors of future spot exchange rates.

Question 11

The three forms of currency convertibility

Answer 11

o Freely convertible
o Externally convertible
o Nonconvertible

Question 12

Ethnocentric approach

Answer 12

 Key management positions are filled by parent-country nationals.

Question 13

Polycentric approach

Answer 13

 Host-country nationals are recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters.

Question 14

Geocentric approach

Answer 14

 Seeks the best people for key jobs throughout the organization, regardless of nationality.

Question 15

Reasons a diverse workforce may improve performance

Answer 15

o Diverse talents bring insights into the needs of a diverse customer base.
o An enterprise with a homogenous employee base is underutilizing talent found among women and minorities.
o Increases employee satisfaction, which results in higher productivity.

Question 16

Expatriates

Answer 16

 Citizens of one country who are working in another country.
 Expatriate Managers are used by ethnocentric and geocentric staffing policies.

Question 17

Inpatriates

Answer 17

 A subset of expatriates who are citizens of a foreign country working in the home country of their multinational employer.